MomentumOptions.com Pre-Market Update for 6/4/2021

Nasdaq Fails to Hold its 50-day Moving Average

8:00am (EST)

The stock market took a step back on Thursday despite better-than-expected updates on the jobs front. Specifically, private payrolls added 978,000 last month versus forecasts of 650,000 while weekly unemployment claims fell below the 400,000 level for the first time since March 2020.

Despite the good news, traders took profits ahead of Friday’s more important May jobs report. Meanwhile, volatility rose on the market pullback but held a key level of resistance to keep the recent choppiness intact.

The Nasdaq settled at 13,614 (-1%) and back below its 50-day moving average with the opening low tagging 13,548. Prior and upper support 13,750-13,500 failed to hold. A close below the latter would indicate additional weakness towards 13,400-13,250.

The Russell 2000 finished at 2,279 (-0.8%) with the session low hitting 2,257. Current and upper support at 2,275-2,250 was tripped but held. A move below the latter would suggest a retest towards 2,225-2,220 and the 50-day moving average. Below is a chart of the IWM.

The S&P 500 closed at 4,192 (-0.4%) with the intraday low tapping 4,167. Prior and upper support at 4,175-4,150 was tripped but held. A drop below the latter would signal a further pullback towards 4,125-4,100 and the 50-day moving average.

The Dow ended at 34,577 (-0.1%) after bottoming at 34,334. Upper support at 34,500-34,250 was breached but held. A close below the latter would likely lead to a further fade towards 34,000-33,750 and the 50-day moving average.

Market Movers

Shares of Ford Motor (F) rose 7% with the 52-week peak hitting $16.06 after the company said sales were up 4.1% in May with year-to-date sales increasing 11.3%. Ford also noted electric vehicle sales grew a stunning 184% last month with sales of over 10,000 vehicles.

Volatility Index

The Volatility Index (VIX) was up for the third time in four sessions with the high reaching 19.27. Near-term and lower resistance at 19-19.50 was breached but held along with the 50-day moving average. A close above the latter would indicate strength towards 20.50-21.

Support is at 17.50-17 followed by 16-15.50.

Market Analysis

The Spider Small-Cap 600 ETF (NYSE: SLY) was down for the second-straight session with the intraday low reaching $97.51. Current and upper support at $98-$97.50 was tripped but held. A close below the latter would signal additional weakness towards $96-$95.50 and the 50-day moving average.

Resistance is at $98.50-$99 with the all-time peak from mid-March at $97.71.

RSI (relative strength indicator) has rolled over with upper support at 60-55 failing to hold. A move below the latter would indicate additional weakness towards 50-45 and prior levels from mid-May. Resistance is at 65-70.

Sector

The iShares MSCI Emerging Markets ETF (NYSE: EEM) had its seven-session winning streak following the pullback to $55.34. Fresh and upper support at $55.50-$55 failed to hold. A close below the latter would would signal a further fade towards $54.50-$54 and the 50-day moving average.

Resistance is at $56-$56.50

RSI is in a downtrend with key support at 60 holding. A close below this level would signal weakness towards 55-50. Resistance is at 65-70.

Market Outlook

The Nasdaq and S&P 500 lost their weekly gains following yesterday’s pullbacks with the Dow and Russell 2000 still slightly higher for the week. This morning’s jobs numbers will likely dictate how the action unfolds with the key indicator heading into next week being where the VIX settles for the session.

A close above key resistance at 20 and back above the 50-day moving average would be a slightly bearish development. I don’t think the market can set another new round of all-time highs unless volatility settles back below 15. The last time the VIX was below this level was February 2020 with the current 52-week low at 15.38.

Momentum Options Play List

Closed Momentum Options Trades for 2021: 17-6 (74%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records. Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades.

Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Stops” entered to close any trades or “Limit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the Daily‬ updates and Text Alerts.

Marathon Oil (MRO, $13.80, down $0.09)

MRO July 12 calls (MRO210716C00012000, $2.05, down $0.05)

Entry Price: $0.85 (5/24/2021)
Exit Target: $2.50 (closed 1/3 at $1.80 on 6/1/2021)
Return: 131%
Stop Target: $1.70 (Stop Limit)

Action: Shares closed slightly lower despite testing a 52-week high of $14.16. Key resistance at $14 was cleared but held. Support remains at $13.50-$13.25.

Western Union (WU, $25.12, up $0.12)

WU June 26 calls (WU210618C00026000, $0.20, unchanged)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -69%
Stop Target: None

Action: Thursday’s peak hit $25.32 with prior and lower resistance at $25.25-$25.50 and the 50-day moving average getting cleared but levels that held. Support is at $24.75-$24.50.

Intel (INTC, $56.24, down $1.24)

INTC June 60 calls (INTC210618C00060000, $0.20, down $0.10)

Entry Price: $0.65 (5/10/2021)
Exit Target: $1.30
Return: -69%
Stop Target: None

Action: Upper support at $56.50-$56 failed to hold on the backtest to $56.08 yesterday. Lowered resistance is at $57-$57.50.

Utilities Select Sector SPDR Fund (XLU, $65.10, up $0.34)

XLU June 69 calls (XLU210618C00069000, $0.10, unchanged)

Entry Price: $0.65 (5/3/2021)
Exit Target: $1.30
Return: -85%
Stop Target: None

Action: Shares tapped a high of $65.70 with lower resistance at $65.50-$66 getting cleared but holding. The close back above the 50-day moving average was slightly bullish. Support is at $65-$64.50.